“Whatever next?” I thought to myself when the New York Times reported that powerful hedge funds were planning to bring a case to the European Court of Human Rights if Greece changed the law to force private bondholders to take losses. Such a step, claim the funds’ lawyers would amount to an infringement of property rights, which is a human right in the EU. It cannot be, bemoaned one, that Angela Merkel decides who wins and who loses. (more...)
Posts Tagged ‘European debt crisis’
Are Investment Yields a Human Right?
Friday, January 20th, 2012Negotiating from a Losing Position
Monday, December 19th, 2011Some consider the eurozone debt crisis to be the result of a fundamental design flaw. They may be right. But then, when in political history has any project been done completely right from the outset. Political and financial frameworks have always had to be modified or adjusted as a function of new events or opinions. What marks out this particular crisis is that the decision-makers seem unable to make a single meaningful step further. Two years and 15 summits into the crisis and we are still engaged in fire-fighting. (more...)
Eurozone Crisis – Give it a Rest
Wednesday, December 14th, 2011Choice fatigue has been a theme that we have regularly visited on this blog – especially in the context of the eurozone debt crisis. The predictions of the decision-making research have proved very prescient: when people are tired, stressed, or simply have too many options to choose from, they tend to opt for the default alternative. But what happens when each decision-maker goes to a summit not knowing what the default actually is? (more...)
Cameron Checkmated?
Monday, December 12th, 2011Who can seriously believe that the leader of a UK government, irrespective of its political colour would not have made the same decisions in Brussels on Friday as David Cameron? This is why it is almost impossible to believe that the whole thing was not planned by the other EU politicians from the outset; having Cameron at the table, goaded on by his euro-sceptic Conservative backbenchers, simply made the outcome more certain. Once the remaining EU26 is rallied to the cause, the next step is to request that one or other EU institution be tasked to perform duties to facilitate the operation of the new treaty-within-a-treaty, for instance the European court of Justice to adjudicate on the legality of national budgets. Again, no British prime minister will accept to fund an institution from whose work it cannot benefit. So we have to expect another ‘No’. (more...)
Debt Cancellation
Monday, December 5th, 2011I have been repeatedly asked over the last few weeks what could be the worst-case scenario for the eurozone debt crisis. It is not a question I like to answer; there are large number of possible paths the crisis could take, which means that there is no single worst-case, but many. And this ignores the effect of the government policy responses those paths would undoubtedly encounter along the way. I do not attach any meaningful probability to it, but when one thinks about any worst-case, it is easy to conjure up images of a total collapse of the economic system as we know it – money, banks, financial markets, growth-based priorities – and some kind of new beginning. (more...)
Fair-Weather Euro 2.0
Tuesday, November 29th, 2011A proposal for the introduction of an ‘elite’ bond – a joint euro sovereign debt backed only by the fiscally-prudent eurozone members – has reopened the discussion about a two-speed Europe. The idea is not new; we have heard politicians contrast the imperatives of the core, versus those of the periphery, before. The assumption is that even if the eurozone is changed in a fundamental way, people will just endorse the change and carry on. But why should they? (more...)
What Does Merkel Really Want?
Monday, November 28th, 2011Do you remember green shoots? What about exit strategies, stress tests, ring-fencing? If you have a very good memory, you may even have a distant recollection of something called moral hazard. The whole history of the crisis, it seems, is one of woeful underestimation of its length, depth and, especially, its cost. Now, at the latest, it must be clear to even the lay observer that delaying a resolution (assuming that a solution exists) is only going to result in the costs going into the stratosphere. (more...)
Tax cut? No thanks
Monday, November 7th, 2011History does repeat itself, at least in terms of German fiscal policy. The federal government is thinking about cutting taxes again, just as it was two years ago. At that time officials soon came to realize that there wasn’t enough money for the plan, but now the government is counting on €16 billion more in tax revenue than it had previously expected. The overall economic situation in Germany is still quite positive, but public opinion is certainly more downbeat now than in January 2010. Back then, a large majority of German citizens didn’t think that a tax cut in the middle of a European debt crisis was particularly bright idea. (more...)
Tuning Out of the Euro Debt Crisis
Wednesday, November 2nd, 2011As I recently viewed one of the many political talk shows on the euro crisis, it occurred to me that good television should be uncomplicated. The EU summit had just concluded, so a few simple words of explanation for the TV audience would have been so welcome. A few well-known politicians had been invited, but I’d already learned not to expect too much from them in such a debate. Also on the set were the ‘experts’, who tried with difficulty to explain the complex issues in plain terms. Making puree out of solid food in order to spoon-feed it to unsophisticated diners avoids indigestion, but the individual tastes and textures are invariably lost in the process. (more...)
UK Politicians Must Yield on Referendum Vote
Monday, October 24th, 2011UK politicians are scrambling over each other to avoid what could be a catastrophic own goal: a referendum on the UK’s membership of the EU. One of the tragic truths of the crisis on the continent is that, on the whole, the economic fundamentals of the eurozone – outstanding debt, budget deficits, trade balances, growth, inflation, etc. – are better than the UK’s. (more...)
